When I’m talking with pharma executives, a common question they ask is “Should we tap into the digital health market?” They want to seize the opportunity this new sector presents, but they’re not sure where to start.
Digital isn’t new to the pharmaceutical industry. Digital innovations are driving optimization across the value chain. Machine learning is being applied in R&D and the Internet of Things (IoT) is changing manufacturing. Cloud solutions are being leveraged along the value chain. And omnichannel platforms are being used to support healthcare provider (HCP) engagements.
Payers, providers and patients are increasingly turning to digital solutions and remote channels—a trend that’s been hastened by the COVID-19 pandemic. They’re embracing telemedicine and electronic health records. Also, some countries are taking advantage of digital prescriptions.
Patients are also wanting to be more self-empowered, guiding the management of their own therapy and health. An Accenture survey found that 60% of patients are willing to use technology more often for communication and disease management. In support of these changing expectations, popular consumer wearables like the Apple Watch and lifestyle apps are offering people the personalized support they want to meet their health and wellness goals, as noted in a blog by my colleague, Laura Westercamp.
These changes have sparked an entirely new set of health offerings—digital therapeutics.
What are digital therapeutics?
Software as a medical device (SaMDs) offer patients more than just the ability to track habits or seek medical expertise. As the software fulfills a diagnostic or therapeutic purpose, or has any type of interference with patient data or information, it is subject to different EU and US regulations for development, manufacturing, marketing and product monitoring.
Digital Therapeutics (DTx), a subset of SaMDs, are helping with the treatment, management and prevention of medical conditions based on clinical evidence. These high-quality software programs seek market authorization in many countries to become part of the standard of care programs, enabling them to address many challenges of healthcare systems.
For pharma companies, digital therapeutics provide an opportunity to create additional value—alongside their traditional pharmaceuticals—and to optimize the patient journey.
Germany is leading the way
The German Digital Healthcare Act, which came into effect in late 2019, set a clear legal path for the introduction of digital therapeutics and their reimbursement for the approximately 73 million people covered by German statutory health insurance. In Germany, they are called digital health applications (Digitale Gesundheitsanwendungen “DiGA”) and they must:
- Be CE-marked as a medical device (risk class I or IIa).
- Have digital technologies as a key component of their functionality.
- Show a positive care effect, such as patient-relevant medical benefits or improvement of structure and processes but are not accepted if used as primary prevention.
- Be patient-centric.
To give patients access to these innovative new products as quickly as possible, Germany has implemented an accelerated “fast track” market access procedure:
- Companies submit DiGA applications to the German Federal Institute for Drugs and Medical Devices (BfArM).
- BfArM evaluates submissions within 3 months based on the manufacturer’s evidence package—which includes the product specifications, ranging from data protection to usability, and evidence of a positive healthcare effect.
- If the DiGA is approved, it’s added to the directory. If it meets the general requirements but has not yet proven a positive healthcare effect, the manufacturer can apply for a provisional listing in the directory. In this case, the required evidence can be provided within a 12-month trial phase (with the possibility of an extension for a further 12 months).
Source: Accenture “German fast track submission procedure” (illustration based on DiGA guide)
The German market is evolving rapidly
As of March 7, 2022, 123 DiGAs have been submitted to BfArM. Of these, 30 have been approved (and only 8 rejected). The DiGA provides an array of benefits, diagnosing and treating diseases as well as facilitating a self-determined, healthy lifestyle. Digital assistants have been of particular interest, with new submissions and approvals every quarter. Based on Accenture interviews with DiGA manufacturers, we expect these numbers to continue increasing. Recently, critical voices have been raised in Germany that DiGA prices are too high, sometimes even exceeding the renumeration of conventional services by physicians. In this context, it is important to note that a framework agreement has recently been established to regulate prices of both existing as well as future DiGAs.
Accenture modeling based on data from BfArM as of March 7, 2022
DiGAs currently listed in the BfArM directory cover a wide range of diseases and related health issues, from diseases of the digestive system to those related to the musculoskeletal system and connective tissue. In the chart below, those in the 3% range equate to a single DiGA, indicating that the market is evolving rapidly as companies pioneer DiGAs in new disease areas. That indicates too, that there’s room for pharma companies to join in and explore new areas to benefit patients.
DiGAs listed in the BfArM directory per ICD-10 classification (as of March 7, 2022)
The largest share of DiGAs focus on mental and behavioral disorders. One reason for this dominance is the early development of digital solutions in this therapeutic area. Consequently, there are already a variety of consumer health and fitness apps, and scientific studies demonstrating the effectiveness of digital.
Something else interesting to note: our research shows that more than 75% of all DiGAs available on mobile devices started as traditional health and fitness apps and only subsequently initiated efforts for approval as a medical device and DiGA listing. This might explain why currently certain public voices criticize the from their perspective perceived low share of really innovative DiGAs and pending evidence of positive care effect amongst currently listed DiGAs. We expect that future DiGAs, maybe developed or co-developed by pharma companies for a specific medical need, will overcome these limitations. Pharma companies are able to link products and services in unprecedented ways, can rely on significant resources and also have years of experience in designing clinical studies to demonstrate effectiveness.
Valuable opportunities for pharma companies in the German market
I see six key benefits for pharma companies considering pursuing DiGAs:
- First mover advantage and scalability to other markets. Being a pioneer in this field lets you develop the governance, structure and knowledge early on, setting you up to rapidly scale for new health indications, target segments or markets.
- Access to patient groups and data insights. DiGAs are a powerful channel with access to large segments of patient groups, including those that previously could not optimally be reached (due to age, indication or location). It can also enable you to collect data that can be combined with AI and process automation to gain new insights that can help you optimize the patient journey.
- Sustainable revenue streams. As the market is further developing through an increased awareness and better HCP and patient education regarding DiGAs, it presents opportunities for a sustainable business model. This may be additionally supported by the number of healthcare systems, possibly following the German approach.
- Access to HCPs and strategic partnerships. Small manufacturers may develop disruptive ideas to improve patients’ lives, but they’ll be challenged in their efforts to access the right HCPs to advertise their products. Pharma companies, with their large sales teams, already have established relations and the power to approach the right audience at scale. Including DiGAs in your portfolio generates new areas of discussion with HCPs. Or strategic partnerships with small DiGA manufacturers could let you access this market early with limited risk and a high learning curve. Despite this great potential of DiGAs, low adoption in terms of both prescription rates as well as usage by the patient might be challenging your business. The root cause of this distortion is the general lack of education and awareness among the population and HCPs. This could be overcome especially with the help of pharma companies through a pro-active education and awareness campaigns targeting key customer segments.
- Solution provider. DiGA offerings have the potential to revolutionize the healthcare system and provide a unique opportunity to strengthen your company’s positioning as an innovator. Because they can be a stand-alone solution and a complement to drug treatments, they offer pharma companies the potential to become an integrated solutions provider.
- Improved patient journey and loyalty. By introducing DiGAs, a single company can own the entire care pathway—from providing information and tracking symptoms to offering interventions in addition to drug treatment. If you can cater to patient needs holistically, you can create seamless patient experiences that increase loyalty.
The digital health application landscape is in flux. You can already see the adoption of approved DiGAs in Germany and a steady stream of new applications being submitted for approval. Nevertheless, we want to emphasize that this market is still in an early phase and developing. In my view, pharma companies that embrace this new sector now—this year—will be several steps ahead of their competitors and in a better position to shape and understand the DiGA business and market as it expands into other countries across Europe and around the world.
Healthcare systems are constantly learning from each other, so I see a high likelihood that other markets will follow Germany’s lead. This will increase the opportunities to scale existing German digital health application to a certain degree and grow your DTx portfolio, providing a time-to-market advantage in following countries.
If you’re interested in learning more about DiGAs please feel free to reach out to me directly or my colleague Heiko Schmidt.